Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Presentation (November 2004)
115 slides from Wesfarmers's investor presentation, Nov 11, 2004
Slide 1: Wesfarmers Limited investor briefing cover letter
7 Wesfarmers Limited ABN 22 008 88¢ 049 LJK/hgw 11 November 2004 The Manager Company Announcements Office Australian Stock Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2000 Dear Sir INVESTOR BRIEFING, SYDNEY Following is an investor briefing presentation that is to be given on 11 November 20
Slide 2: Wesfarmers Investor Briefing
Vesfarmers Investor Briefi
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Slide 4: Overview of the business
e Overview of the business e Progress in 2004/05 e Strategies e Business outlook
Slide 5: —=——r—“—OCC—C—— Fhrs—SF™
—=——r—“—OCC—C—— Fhrs—SF™ =—h CWrC—CrF—C—se | So
Slide 6: Two market segments
e« Two market segments - Industrial Products - Maintenance Repair & Operating (MRO) - Safety Products e Wesfarmers Industrial and Safety is the market leader in highly fragmented markets WIS Estimated Market Share Industrial Safety Products Products Australia 7% 25% New Zealand 7% 45%
Slide 7: Blackwoods
Blackwoods Atkins Pr@tector “ener BAKERS ackaging House CONSTRUCTION + INDUSTRIAL Blackweods 2 Paykels : Mullings Fasteners | Pr
Slide 8: Locations
Locations @ TRADING STYLES: @ Blackwoods @ Atkins @ Blackwoods Atkins @ Bakers @ Motion @ Metals @ Mullings @ Protector Alsafe @ NZ Safety (NZ) @ Protector (NZ) @ Packaging House (NZ) 65 3 21 6 10 1 9 55 24 22 11 @ Blackwood Paykels (NZ) 27 rere TOTAL A TWEED HEADS 7 dee @ BRANCHES fiom — NSW conor
Slide 9: _ _ | So
_ _ | So
Slide 10: July - October EBITA marginally below last year
e July - October EBITA marginally below last year e Industrial Products experienced continued sales growth in Queensland and Western Australia with tight market conditions in NSW and Victoria ¢ Protector Alsafe difficult trading conditions continue e Established New Zealand businesses performed well
Slide 11: Rollout of new trade centres
¢ Rollout of 8 new trade centres - Qld - Kawana Waters, Rockhampton, Coopers Plains - NSW - Coffs Harbour, Dubbo - SA - Edwardstown - WA - Osborne Park, Bayswater e New distribution centre - Wiri (Safety New Zealand)
Slide 12: Increase sales and market share
¢ Increase sales and market share increase e-business sales improve brand positioning increase sales in direct imported products network expansion (ie trade centres) . __ Investor Briefing 7 - ~~ LILLE LL Oe
Slide 13: Trade Centre
‘Trade Centre | Jpvestor briefing
Slide 14: Investor Briefing
i: _ Investor Briefing
Slide 15: all
all Jpvestor briefing
Slide 16: Jpvestor briefing
Jpvestor briefing
Slide 17: Reduce expense to sales ratio
e Reduce expense to sales ratio - optimise the distribution network - improve information system e Reduce working capital - reduce debtor days - reduce inventory e Improve safety performance
Slide 18: Australia and New Zealand outlook
« Australia - Market conditions remain solid, with strong spending in the mining & infrastructure construction industries - Increased competition and tightening margins « New Zealand - Continued solid market conditions
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Slide 20: Manufacturer of mining and processing chemicals
e Manufacturer of mining & processing chemicals ammonia, ammonium nitrate, sodium cyanide, chlorine e Manufacturer and importer of fertilisers phosphate, nitrogen, potassium and compounds ¢« Manufacturing operations at: Kwinana, Albany and Esperance (WA), Moura (Qld) e 550 employees e Post 1999, aro
Slide 21: EBITA/Capital
EBITA/Capital 2002 2003 2004 2001 2000 —@ EBITA/Capital < EF a) ua on = = = . oo Investor Br
Slide 22: Injuries
Injuries 100 80 60 40 20 ii Lost Time Injuries El Workplace Injuries ~@-R12 LTIFR 2002 2003 2004 R12 LTIFR 10 ort NW hI DD I
Slide 23: SESS
. . . _ _ _ | SESS
Slide 24: Ammonia
e Ammonia - Sole WA manufacturer (capacity 260,000 tpa) - 40,000 tonnes import / export storage terminal - Product sold to nickel industry and export markets - Significant quantity consumed internally
Slide 25: Ammonium Nitrate
¢ Ammonium Nitrate - Sole WA manufacturer (capacity 235,000 tpa) - distribution for mining explosives via Dyno Nobel - Flexi-N liquid fertiliser consumes balance of production - Queensland Nitrates plant at Moura (capacity 185,000 tpa)
Slide 26: Sodium Cyanide
« Sodium Cyanide - Australian Gold Reagents - sole WA manufacturer - Solution plant capacity 48,000 tpa - Solid sodium cyanide plant capacity 20,000 tpa - Strong Australian market position - Developing export markets for solid product ¢ Industrial Chemicals - Baseload production of chlorine for WA W
Slide 27: Profitably build on existing businesses
¢ Profitably build on existing businesses - examining AN production expansion opportunity - sodium cyanide debottlenecking underway ammonia plant debottlenecking complete e« Evaluate growth opportunities - exploit core competencies - expand product range in existing markets - assess opportunities in
Slide 28: Location
« Location e Feasibility study scope e Environmental approvals ¢ Capital expenditure estimated at $140 million e Commissioning expected in 2007 e« Market opportunities
Slide 29: Generally strong resource sector conditions
e Generally strong resource sector conditions - lron ore expansion in Pilbara - Coal expansion in Bowen Basin - Opportunities available in gold sector - Nickel volumes driving ammonia sales - Outlook underpins additional investment in chemical manufacturing
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Slide 31: Unmatched infrastructure in WA market
¢ Unmatched infrastructure in WA market - volume growth readily handled e Extensive distribution network - commission based reward structure - AWB Landmark, Elders & independents - all collections ex-CSBP facilities e CSBP market support - field staff supporting distribution network and account mana
Slide 32: Million tonnes
million tonnes 1.0 0.8 0.6 7 0.4 - 0.2 - 0.0 2001 investor Briefing 2002 1 Western Australia 2003
Slide 33: Profitably build core WA business
¢ Profitably build core WA business - manufacturing and supply chain opportunities - strengthen sales channel ¢ Product and service leadership - differentiated products - optimise liquids growth - best service and technical support - competitive pricing ¢ Develop markets beyond WA for proprietary pr
Slide 34: Anticipate cautious start to 2005 season
¢ Anticipate cautious start to 2005 season - 2004 harvest impacted by frost and dry finish - strong Australian dollar e Sales programme underway - Successful launch of 3 year contract - enhanced range of products and services ¢ Continued growth in liquid fertiliser
Slide 35: ses
_ ses
Slide 36: Wesfarmers Insurance Division overview
« Wesfarmers Insurance Division overview e Description of business units e Insurance industry analysis e Achievements « Outlook
Slide 37: Insurance division structure
| ce —-@GNZ) oC Lumley Gener: Lumley General _ Wesfarmers 1 General | : ee _ Federation Australia New Aenlane | Insuranc | Technology / Genz Lumley Finance New Zealand Lumley Finance _ Austral __ Investor Briefing
Slide 38: Specialised skills and products
e Specialised skills and products « Short tail focussed e Ranked 9 in Australian market ¢ 2004 Gross Written Premium of $543m e Strong focus on underwriting
Slide 39: Gross Written Premium by line
Gross Written Premium for 12 months to 30 June 2004 = $543m Liability Other % 17% Personal Lines 8% 10% Commercial Motor 26% Engineering 13% Marine 5% Commercial 21% investor Briefing
Slide 40: Specialised skills and products (New Zealand)
e Specialised skills and products e Short tail focussed e Ranked 3 in New Zealand market ¢ 2004 Gross Written Premium of A$235m e Strong focus on underwriting e Increasing support from intermediaries
Slide 41: Gross Written Premium by line (NZ)
Gross Written Premium for 12 months to 30 June 2004 = AS$235m Liability 10% Other Personal Lines 8% (inc. Westpac) 27% Commercial Engineeri = Motor eerin i 8 8 Marine 32% 5% Commercial 11% 7%
Slide 42: Focused on rural and small business sectors
e Focused on rural and small business sectors in Australia e Specialist niche insurer « Ranked 14 in Australian market « Ranked 2 in rural market after IAG/CGU e 2004 Gross Written Premium of $248m
Slide 43: Gross Written Premium by line (rural)
Gross Written Premium for 12 months to 30 June 2004 = $248m Commercial Motor Liability 17% 12% Commercial 23% Personal Lines 29% Crop 8% Employers Liability 10% investor Briefing
Slide 44: Insurance software specialist
e Insurance software specialist e« Wesfarmers ownership 60% e Will be deployed as WFI and LGNZ platform e Growing prospect pipeline for future sales
Slide 45: Top Insurers
e¢ Top 12 Insurers Gross Earned Premium & “ oS a © ey & & eS Ao Rw ee & Ra = we Kos oe AS < ~~ Souree : Deloitte and Trowbridge 2003 Investor Briefing
Slide 46: Reinsurance expense and ratios
Reinsurance expense (excl AMO) 6.6 NELR (%) 66.8 COR (%) 91.2 Reinsurance expense (% GEP) 6.6 |, _ lpvestor Briefing 7 LL oo Le es
Slide 47: Financial targets for 1st year exceeded
e Financial targets for 1%* year exceeded e Implementation of Wesfarmers’ systems - Uniform risk management approach e Restructure of Lumley Technology « Formation of WID infrastructure team - Modest IT synergies achieved
Slide 48: Reinsurance review progressing
e Reinsurance review progressing e Favourable claims outcome e WES financial targets exceeded e Cultural alignment achieved e« Management programme introduced for senior executives
Slide 49: Continuing favourable claims experience
¢ Continuing favourable claims experience « Competitive environment e Some rate reductions ¢ New Zealand growth moderating e Financial performance above target
Slide 50: SEES
. . se — _ . SEES
Slide 51: Australian Railroad Group, Gresham Private Equity
¢ Australian Railroad Group e« Gresham Private Equity
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Slide 53: Revenue and earnings up strongly
e Revenue and earnings up strongly (p.c.p. had low grain harvest) e Other tonnage growth mainly in iron ore e Rising fuel costs continue to erode earnings ¢ Continue safety focus e Lack of train drivers
Slide 54: Average grain season expected
« Average grain season expected
Slide 55: Industry grain estimates at end October
Industry estimates at end October a OQ Tonnes (milions) iT f 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 4 Western Australia & South Australia __ Investor Briefing
Slide 56: Average grain season expected
« Average grain season expected ¢ Strong minerals tonnages ¢ Continuing safety and incident management e Ongoing capital expenditure
Slide 57: South West line upgrade
eSouth West line upgrade eHighest tonnage sector °©$27m in 04/05 Mundijong Jct 43 By @ oy Seco &, % zy vag Pinlarra S? Pinjarra Sth wo. Ehwellingup Jpvestor briefing
Slide 58: - se _ | So
- se _ | So
Slide 59: Gresham: 50% interest
resham 50% Interest « No divestments to date this financial year ¢ Current capital investment by Wesfarmers: $40m e Net Fund IRR to date running at approx. 35% pa ¢« Five investments remain
Slide 60: Gresham investments
¢ EROC e« Norcros « Riviera e Virgin Active e« Raywood contract mining and tunnelling building materials, coatings luxury cruisers health clubs vehicle dispatch systems
Slide 61: Wesfarmers commitments to Fund
° Wesfarmers has committed $100m to Fund 2 ¢ Further commitments from Wesfarmers of up to $50m dependent on reaching target capital of $300m - $350m ¢ Co-investment (retail) fund has $102m commitments e Fund 2 currently has total capital of $241m (including Co- investment Fund) e GPEF2 and GPECF par
Slide 62: Fund structure
Liye Ly) Vy yy yyy ie i _ 7 Ly yy Le LD yy yy . oo. , LL _ Ll Le go inv ig) CD cS 7 — aie Stnen (Investor Pool 4 ts ns Le oy a — yo oe ne ge y wes yy Wy oo 4, 7 a ay a . L — — Fund for GPEF2) S| ic Le (Manager) (Investment Vehicles) Jpvestor briefing
Slide 63: Gresham first investment: Noel Leeming
Gresham Private Equi “irst Investment _ e Noel Leeming - NZ’s leading electrical retail business e Acquired for NZ$138.5m « Wesfarmers’ investment to date is $16m
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_ _ 0 Ss
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Slide 67: Background, achievements, progress, strategies, outlook
1. Background 2. 2003/04 Achievements 3. Progress in 2004/05 4. Strategies 5. Outlook
Slide 68: Bunnings
UNINING A. NNINGS WIDEST RANGE LOWEST PRICES BEST SERVICE
Slide 69: Store totals
Totals Warehouses Smaller Format Stores WA Salvage Stores as at 31 October 2004 excludes DC’s and Frame and Truss sites | Ipvestor Briefing 7 LL oo Le es
Slide 70: Revenue and EBITA ratio
Revenue ($m) 3,474.5 3,845.7 10.7% Amortisation ($m) 50.1 50.1 0.0% EBITA/Sales Ratio 10.0% 10.2% 0.2% | Ipvestor Briefing 7 LL oo Le es
Slide 71: Strong EBITA result despite slowing sales
¢ Strong EBITA result despite slowing sales Excellent response to New Zealand branding Good margin performance Tight expense control Continued strength in Qld & WA Improving NSW Challenging Vic & SA
Slide 72: Cash store on store growth 11%
e Cash store on store growth 11% 4th quarter cash store on store growth 7% e Opened 12 warehouses - upgraded 15 other stores e« Opened 2 new distribution centres e Recruited over 4,000 team members
Slide 73: July - October store on store cash growth 8%
e July - October store on store cash growth 8% ¢ Tighter trade market « 2 new warehouse openings year to date ¢ Strong direction within business Range, trade, new systems and supply chain
Slide 74: Focus on retail drivers
1. Focus on retail drivers 2. Store network development 3. Trade business 4. Team members 5. Business systems 6. Business improvement
Slide 75: Focus on core retail drivers
1. Focus on core retail drivers « Range Innovation driving WIDEST RANGE ¢ Price Strong cost focus delivering LOWEST PRICES Productivity loop « Service Best people delivering BEST SERVICE
Slide 76: Store network development
2. Store network development « Continue 8 to 12 new warehouse openings Additional smaller store developments ¢ Format and development adaptability « Store upgrades and refits « Relocate low performing sites
Slide 77: Trade business
3. Trade business e Stronger focus, increased resources e Implementing business plan - Trade Distribution Centres ¢ Targeting profitable market share growth
Slide 78: Bunnings Credit Sales vs National Housing Work Done
Bunnings Credit Sales vs National Housing Work Done* (Indexed to 100) 160 140 - 120 - 100 -
Slide 79: Team members
4, Team members ¢ Attracting, developing and engaging quality people - Reduction in key operational vacancy rates e« Development investment - Accelerated Management Development - Corporate “University” and e-learning systems e Continuing strong safety focus
Slide 80: Business systems
5. Business systems ¢« Major systems upgrade Preferred vendor selected Implementation planning underway « 3 year phased program e 1% phase deliverables New inventory management system New distribution centre systems
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